Friday, April 3, 2009

AUSTIN — Adult video stores and nude dancing clubs will pay a 10 percent tax on every dollar they charge patrons for admission under a measure approved Thursday by the Texas House.

Though it still needs a nod from the Senate, House lawmakers agreed to revoke the $5 per person tax they imposed on strip clubs in 2007 and replace it with a 10 percent tax on admission fees to all sexually oriented businesses.

The adult entertainment industry pushed hard for the change because it will cost operators less. It will be up to individual businesses to decide whether they pass the tax on to patrons or absorb the cost themselves.

The new tax would raise between $4 million and $8 million a year, though the one it replaces would have raised at least three times more, according to estimates.

Three quarters of the money would go to sexual assault programs. The remaining one-fourth would go to public schools, a requirement of the Texas Constitution for all occupation taxes.

The adult entertainment industry had successfully attacked the current law as a violation of the First Amendment.

A Travis County district court judge agreed, ruling that the 2007 tax was unconstitutional because the state failed to link the activity being taxed — nude dancing — to the indigent health care program that was supposed to reap the benefits.

The state’s appeal is pending at Austin’s 3rd Court of Appeals.

Rep. Senfronia Thompson, D-Houston, who sponsored the bill, said her proposal will resolve the lawsuit because the new “occupation tax” does not target nude dancing, a form of expression protected by the First Amendment.

The Texas Entertainment Association, an industry group formed to fight the 2007 law, supported Thompson’s bill as a way to get the issue out of the courts.

“We’re going to be able to end the lawsuit and allow the state to be able to spend $11 million,” said Thompson, referring to taxes collected under the 2007 law that are being held by the state comptroller pending the outcome of the legal case.Campaign contributions

Critics of the bill say topless clubs could simply circumvent the law by removing or reducing cover charges. And, they add, many adult bookstores do not charge an admission fee.

“House Bill 982 is a bill pushed by the strip club industry as a supposed compromise. It raises very little, if any, money,” said Torie Camp, deputy director of the Texas Association Against Sexual Assault.

Thompson received $4,500 in campaign contributions from strip club owners and lobbyists in a one-month period last fall. Two club owners who are members of the entertainment association have given $65,000 to lawmakers and state elected officials over the past five years.